In the second quarter of 2016, demand for high-capacity eMMC/eMCP from Chinese smartphone brands and the stock-up activities ahead of the iPhone 7 release caused a gradual tightening of NAND Flash supply. The decline in contract prices for eMMC and SSDs of both client and enterprise grade also started to ease during the same period, according to the latest report from DRAMeXchange, a division of TrendForce. Channel prices of NAND Flash wafers have even begun to rise on a monthly basis since April. Consequently, the combined global revenue of branded NAND Flash suppliers increased 3.4% sequentially in the second quarter. This result signaled the end of revenue decline that persisted in the past two consecutive quarters.
Sean Yang, research director of DRAMeXchange, expects a profitable third and fourth quarter as the peak season takes hold: “Demand is rising sharply for smartphones and client-grade SSDs in this year’s second half, so NAND Flash supply is going to become increasingly tight in the third quarter. As NAND Flash prices go steadily upward, DRAMeXchange expects suppliers to post further growths for their revenues and operating margins in the third quarter. Sequential revenue and operating margin increases are also forecast for the fourth quarter.”
In the second quarter, Samsung registered a sequential increase of about 10% in its NAND Flash revenue. The operating margin for the business also grew for the second consecutive quarter. These results were mainly on the back of its fast-growing enterprise-grade SSD market share and increasing orders for high-capacity eMMC/UFS and eMCP products. Compared with the first quarter, Samsung’s NAND Flash bit shipments expanded by about 15%. Also, the supplier’s NAND Flash ASP fell by only around 5%.
“In terms of product strategy, Samsung has rapidly gained market share with its 3D-NAND Flash SSDs,” said Yang. “The company is also the market-share leader for high-capacity eMMC/UFS and eMCP. As for 3D-NAND Flash production, Samsung is continues to expand its capacity. Hence, Samsung’s NAND Flash bit output for 2016 will exceed the industry’s average.”
The whole of Toshiba’s New Fab 2 has begun mass production of 3D-NAND Flash and will achieve a capacity of 40,000 wafers per month in the fourth quarter. The 15nm process is still Toshiba’s primary manufacturing technology and is expected to make up 80% or more of the company’s total bit shipments starting this third quarter. Furthermore, the share of TLC-based products in Toshiba’s bit shipments will also increase to almost 50% in the third quarter due to major clients adding new orders at the end of the second quarter.
In the future, Toshiba will diversify its customer base to reduce the risk of being overly dependent on just a few main clients. The company will allocate more resources to develop enterprise-grade SSDs as well as expanding its market share for client-grade SSDs. DRAMeXchange projects that Toshiba’s SSD products will account for nearly 30% of the company’s NAND Flash consumption starting in the fourth quarter of this year.
Western Digital (WD) continues to rely on 15nm NAND Flash products as the main revenue generator, according to its NAND Flash revenue results for the company’s 2016 fiscal fourth quarter (April to June). WD is currently accelerating the development of its 64-layer 3D-NAND Flash that has a maximum density of 512Gb per chip. The company will also focus on the TLC architecture to further enhance its cost advantage.
On the production side, WD increased its overall NAND Flash capacity by 5% between the second and third calendar quarter. The supplier’s bit shipments for 2016 will also grow by around 30% over the previous year. By the end of 2017, 3D-NAND Flash is expected to constitute at least 40% of the supplier’s annual bit output. “WD is a leading storage solution provider with a complete range of HDD and SSD product lines,” noted Yang.
SK Hynix’s NAND Flash revenue rose 37% sequentially in the second quarter to US$882 million. Furthermore, the supplier’s bit shipments also surged 52% sequentially on account of strong demand from Chinese smartphone brands and shorter base period of the first quarter. DRAMeXchange anticipates that SK Hynix will expand its shipments of eMMC/UFS and eMCP as well as enlarging its share of the SSD market. Given these conditions, the supplier’s third-quarter NAND Flash bit shipments are forecast to grow about 15% compared with the prior quarter.
Regarding product development, SK Hynix is increasingly relying on its latest 14nm process, which is going to account for a greater share of the bit output starting in this third quarter. Additionally, the supplier is projected to have a 3D-NAND capacity of around 20,000 to 30,000 wafers per month at the end of 2016.
Micron’s bit shipments of non-volatile memory dropped 10% sequentially in its fiscal third quarter for 2016 (from March to May), while the ASP and bit cost fell 6% and 3% respectively compared with the prior fiscal quarter. In sum, the supplier’s NAND Flash revenue for its fiscal third quarter fell by almost 15% sequentially to US$908 million.
Micron’s Fab 10X is currently doing small-batch production of 3D-NAND Flash this third calendar quarter and is scheduled for mass production in the fourth calendar quarter. Micron’s 3D-TLC SSDs with SATA interface have already been sent to major PC-OEMs for testing. The supplier is also preparing to launch its second-generation 3D-NAND Flash, which is anticipated to have 30% less unit cost than the first generation. As the share of 3D-NAND in Micron’s total bit shipments increases rapidly, DRAMeXchange forecasts that Micron’s NAND Flash bit shipments for 2017 will be above the industry’s average.
Compared with the first quarter, Intel’s NAND Flash revenue fell just 0.5% in the second quarter to US$554 million. Intel suffered a sequential ASP decline larger than 10% for all its NAND Flash products due to increasing competition in the second quarter. However, the revenue decline was modest as the supplier’s quarterly bit shipments bounced back and grew over 10% sequentially.
Enterprise-grade SSD products based on 16nm and 20nm processes currently constitute the majority of Intel’s NAND Flash product portfolio. The highly anticipated 3D-MLC enterprise-grade SSDs are going into mass production at the end of the third quarter, helping Intel to significantly improve its cost competitiveness. Also, the conversion of Intel’s fab in Dalian, China, is proceeding as scheduled. Equipment has been installed and the fab is currently doing trial production. The plan for the fab to begin mass production and shipments in this year’s fourth quarter remains unchanged.